Sales boost sees Asda claim it's ahead of Tesco and Morrisons in battle to compete against Aldi and Lidl

Asda today said it was outperforming its rival supermarkets and that its prices were now closer to those of discounters Aldi and Lidl as it posted a 0.6 per cent rise in quarterly sales.

The second largest supermarket in the UK said the improvement in sales, which in the first quarter rose by just 0.1 per cent, was the result of lowering prices more quickly than its rivals in a sector that has seen ‘unprecedented change’ and challenges.

Asda, which is owed by US giant WalMart, has invested £1billion in lowering prices in an effort to compete with discounters such as Aldi and Lidl, which have gained more market share over the recent months to the detriment of Tesco and Morrisons.

Challenges: Asda has invested £1billion in lowering prices in a bid to compete with discounters

Asda chief executive Andy Clarke said the price gap with the discounters was as narrow as ever and that rivals were trying to copy Asda by ditching vouchers and other gimmicks for ‘every day low price’.

Despite the rise in sales, Clarke was cautious about the future. He said: ‘We are expecting to get growth but I think it's going to be very challenging.

‘The last quarter has seen unprecedented change within the food retail sector and whilst I do not underestimate the challenge currently presenting retailers, I am proud that our business identified and put plans in place to respond to these changes early.’

Asda’s sales improvement is in contrast with the performance of rivals Tesco and Morrisons, both of which have issued profit warnings.

Caution: Asda chief executive Andy Clarke

The trading update comes as official figures have confirmed a further squeeze on UK households, with average weekly wages falling for the first time in five years.

Supermarkets in Britain saw the lowest market growth in a decade in the 12 weeks to the end of July, recent figures by market researcher Kantar have showed.

Clarke said Asda’s price strategy addressed the fact that there was a ‘two-stage recovery’ with different experiences across the country.

‘It feels very different if you are in London to Northern Ireland or the North East. If you are a family on a budget in those difficult regions it still feels very challenging,’ he said.

But he added: ‘We are pleased with our performance relative to the market. We believe that's clearly driven by the strategy we executed some time ago.’

Asda’s clothing brand George has grown to become the second largest clothing retailer by volume, boosted by the popularity of its affordable school uniform offering.

The chief executive also described plans to roll out trial formats for some of its larger stores, which it is to try to transform into ‘destination’ sites later this year, with partnerships with other retailers using space in these sites.

He brushed off suggestions that Tesco had tried a similar strategy and failed under soon-to-depart boss Philip Clarke.

The Asda boss said: ‘We have a much smaller large store estate than some of our competitors. We are working with a different level of space.’

Meanwhile, online grocery sales grew more than 20 per cent, with click and collect now representing 10 per cent of this.

There are now more than 400 click-and-collect sites throughout the country ranging from lockers to Transport for London sites, with an aim to grow this to 1,000, with nearly 300 now offering same-day collection.

Margins were growing despite low prices because of a focus on costs, Asda added.